Pump Procurement Strategies: Why Low Initial Cost Doesn’t Translate to More Overall Savings
Industrial pumps play a crucial role in the overall functioning and efficiency of various industries. Paper mills, power plants, desalination plants, chemical processing factories, fertiliser units, oil and gas industries, cement industries and several other industrial units depends on high-quality pumps to move liquids and fluids from one place to another.
Right from the initial cost of the equipment to operating costs, pumps incur various expenses in their lifetime. It’s common for plant owners to look for pumps at low initial costs. They believe that it helps them cut down on expenses by reducing procurement costs. However, the truth is that – getting a pump at low initial cost doesn’t translate to overall savings in the long run.
Let’s explore this aspect in detail.
Analysing the Total Lifecycle Cost of Pumps
The lifecycle cost of pumps can be classified into three major categories:
Initial Investment –
This includes the cost of pump purchase, installation costs and other miscellaneous expenses. It’s one-time expenditure and doesn’t reoccur.
Operating and Maintenance Costs –
This includes pump maintenance, operating expenses and downtime expenditures. It’s a reoccurring expense.
Energy Costs –
This includes pump maintenance, operating expenses and downtime expenditures. It’s a reoccurring expense.
On average, in the total lifecycle cost of the pump, the initial cost accounts only for less than 1/3rd of the overall pump costs. 30% of the overall costs account for the initial investment, followed by 32% on energy expenditures and 38% on operational costs.
To reduce the initial procurement rates, most pump buyers choose the suppliers who offers them the cheapest initial costs. While this may seem like a good decision at the outset, it’s not a smart decision in the long run.
So, does it make sense to buy a cheap, low-quality pump or spend extra in purchasing a high-quality pump that comes with higher initial costs? This is one of the most common challenges faced by buyers.
Let’s explain the scenario with an example. Consider a high-efficiency pump (Pump A) that costs Rs. 40,000. On the other hand, there’s another low-cost, low-efficiency pump with an initial cost of Rs. 20,000.
Pump A is energy-efficient and the annual electricity bill is around INR 10,000 with other operating costs of INR 2500 per year. On the other hand, Pump B is not energy efficient and its annual electricity costs are around INR 15,000. Additionally, it requires around INR 8000 per year for repairs and replacements.
Let’s calculate the year-on-year costs for both these pumps for five years.
Pump A | Pump B | |
Initial Purchase Cost | Rs. 40,000 | Rs. 20,000 |
Operating Cost for 1st year | Rs. 12,500 | Rs. 23,000 |
Operating Cost for 2nd year | Rs. 12,500 | Rs. 23,000 |
Operating Cost for 3rd year | Rs. 12,500 | Rs. 23,000 |
Operating Cost for 4th year | Rs. 12,500 | Rs. 23,000 |
Operating Cost for 5th year | Rs. 12,500 | Rs. 23,000 |
Total Lifecycle Cost of the Pump after 5 years | Rs. 1,02,500 | Rs. 1,35,000 |
From the table, we can see that though Pump A costs double than the Pump B but has proven to be the cost-effective choice in the long run. We have not included the year-on-year increase in electricity costs for this calculation. If the calculations were further extended, then we can easily see that Pump A is cost-effective in the long run.
In industries like chemicals, oil and gas, water and wastewater, pumps have a long-life span of around 25 to 30 years. Hence, it makes sense to invest in a high-quality, energy-efficient pump that will run for years without causing any troubles.
So, which is the better option? Low-Cost Pumps or High-Cost Pumps?
It depends on the application. You can opt for low-cost pumps for short-term projects like a temporary site or where the pump will be used only for a few years, say around 3 to 5 years. For long-term permanent projects, invest in high-quality pumps though they may be a bit expensive.
Finally, when choosing pumps, look beyond the cost of procurement. Consider other factors that determine the pump’s lifecycle cost like efficiency, downtime, maintenance and overall quality.
If you’re looking to source the best industrial pumps in India, look no further than EuroIndustriel. As one of the top industrial procurement suppliers, we have collaborations with the best pump manufacturers in Asia. We can help you find the best pumps for your specific requirements.
